Electronic
Data Interchange:
Electronic Data Interchange
(EDI) is the electronic exchange of business documents in a standard, computer processable,
universally accepted format between trading partners
In EDI, the computer Applications
of both the sender and the receiver, referred to as Trading Partners (TPs) have
to agree upon the format of the business document which is sent as a data file
over an electronic messaging service
Since data is exchanged in
standard pre-defined formats, it becomes possible to exchange business
documents, irrespective of the computerized business application at either end
of communication.
Once data are entered into the
buyer’s computer system and transmitted electronically, the same data get
entered into the seller’s computer, without the need for re-keying or re-entry.
This is normally referred to as application-to-application EDI.
The
repeated keying of identical information in the traditional paper-based
business communication creates a number of problems that can be significantly
reduced through the usage of EDI. These problems include:
- Increased time
- Low accuracy
- High labor charges
- Increased uncertainty
Costs
and Benefits:
Where EDI has been
implemented, computers electronically exchange business documents with each
other, ideally without human intervention. This reduces operating costs,
administrative errors, and delivery delays. The benefits accruing from EDI implementations
can be classified into direct benefits and long term strategic benefits.
Direct
Benefits of EDI
1.
Since the transfer of information from computer
to computer is automatic, there is no need to re-key information. Data is only
entered at the source.
2.
The cost of processing EDI documents is much
smaller than that of processing paper documents.
3.
Customer service is improved. The quick
transfer of business documents and marked decrease in errors allow orders to be
met faster.
4.
Information is managed more effectively
Strategic
Benefits
1. Customer
relations are improved through better quality and speed of service.
2. Competitive
edge is maintained and enhanced.
3. Reduction
in product costs can be achieved.
4. Business
relations with trading partners get improved.
5. More
accurate sales forecasting and business planning is possible due to
availability of information at the right place at the right time.
6. There
is improved job satisfaction among data entry operators, clerks, etc. when they
are re-deployed in more creative activities.
Components of EDI Systems
The
three main components required to be able to send or receive EDI messages are:
EDI
standards
EDI
software
Communication
networks
EDI standards:
While
using EDI, it becomes possible for a business application on the computer of
one organization to communicate directly with the business application on the
computer of another organization. This exchange of information should be independent
of hardware, software or the nature of implementation at either of these two
organizations.
In
order to achieve this, it is required to extract data from the business
application and to transform it into a standard format which is widely, if not
universally, acceptable. This standard data, when received at the destination,
is interpreted and automatically delivered to the recipient application in an
acceptable form.
The
exchange of business documents in a commonly agreed structured format
necessitated the development of EDI standards. EDI standards are basically data
standards in that they lay down the syntax and semantics of the data being
exchanged.
Some
groups promoted the idea of an industry-wide EDI standard. This led to the
formation of the Accredited Standards Committee (ASC) X12. The X12 Committee of
the American National Standards Institute (ANSI) has, therefore, developed
standards for use by all US businesses. These are commonly known as ANSI X12
Standards.
UN/EDIFACT
(EDI for Administration, Commerce and Transport) standard was announced in 1987
by the United Nations. The EDIFACT Standard has since been promoted by 148
E-COMMERCE the UN for international trade.
EDI
Software:
EDI
software consists of computer instructions that translate the information from
unstructured, company-specific format to the structured EDI format, and then
communicate the EDI message.
EDI
software also receives the message and translates from standard format to
company specific format. Thus, the major functions of the EDI software are data
conversion, data formatting and message communication.
Although
any file transfer protocol can be used to transport standard EDI messages, the
benefits of using X.400 Message Handling Systems (MHS) to do this were recognized
early on. These include the store-and-forward nature of X.400 MHS as well as
the generation of delivery reports.
A
special upgrade to X.400 MHS was brought out in 1990 through the X.435
standard—a protocol specially designed for handling EDI messages.
Communication of EDI Messages:
EDI documents are
electronically exchanged over communication networks which connect trading
partners to one another. These documents are stored in user mailboxes on the
network’s EDI server from where they can be downloaded/ Fig. 7.3 The components
of EDI systems ELECTRONIC DATA INTERCHANGE 151 uploaded at the user’s
convenience.
These networks provide users
with a single point interface to the trading community, thereby freeing the
user from the worries of handling different communication protocols, time zones
and availability of the computer system at the other end
For the exchange of EDI
messages over the Internet, issues relating to message delivery acknowledgement
and security of business documents are being addressed by the Internet
Engineering Task Force.
The reliability of message
transmission along with the generation of delivery notifications provided by
X.400 Message Handling Systems resulted in a number of EDI server products
being developed over X.400-based communications.
Recommendation X.435 is one of
a set of recommendations for message handling. The entire set provides a
comprehensive blueprint for an MHS realized by any number of co-operating open
systems.
EDI Implementation Issues:
At an
entry level implementation of EDI, paper forms could be replaced by electronic
forms. These forms are filled within the organisation and sent over a
communication network to the recipient.
For a
solution in which all benefits of EDI are achieved, EDI should be integrated
with the business applications. Or, there could be a Front-end processor (FEP)
taking care of translation 156 E-COMMERCE and communication.
This
FEP could be connected over a LAN to the computer system on which the organization’s
business application is running. Information could then be downloaded and
uploaded between the FEP and the computer.
This
approach ensures the smooth flow of data between business processes and the EDI
module. Full-blown, integrated EDI is a hands-off process that relies on
computers to do the work. Preparing and processing purchase orders is a very
routine matter in any company.
References
1.
E-Commerce The Cutting Edge of Business Second
Edition by KAMLESH K BAJAJ & DEBJANI NAG [Tata McGraw-Hill Publishing
Company Limited]